Bankruptcy of joint title owner

Asked by Alan Klimpt, Bay Area, CA Sat Dec 15, 2007

If I and my business partner are both on title and on the loan (5 yr, interest only) of a residential property in Merced California and my business partner is currently filing for bankruptcy (due to an unfortunate circumstance), how will that effect my credit? I want to sell this home in Merced and do NOT want to forclose. This home's value is either the same or a bit less than the time of purchase (roughly 2 years ago) so there is no equity in the property. What would be the easiest way to sell this house? Ideally we'd like to avoid Realtor fees as she is unable to pay for them. Would a bank be interested in a short sale on this property? What makes a bank want to agree to a short sale? What about a deed in lieu? Will her filing for bankruptcy adversely effect my credit? Will we be forced to foreclose because she is filing for bankruptcy?

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Ian A. Wolf, Agent, Morristown, NJ
Sun Dec 16, 2007
Unless you are at least 3 months behind in your mortgage payments, the bank will not discuss a short sale with you. A bank will usually be interested in a short sale if payments are behind, the condition of the property is below average and/or based on market conditions the property isn't worth as much as the loan amount.

As long as loan payments are current your partner filing bankrupcy should not affect your credit.
A deed in lieu will still affect your credit(as will a short sale). In either case your are not making good on your debt. Filing for bankrupcy actually can prevent a bank from foreclosing rather than forcing it to happen. You'll need to talk to a bankrupcy attoreny to get the details on that.

All the above being said the best thing to do would be to would be to consult with a number of different agents to get their opinion. That won't cost you anything and it will give you a good idea of where you stand(e.g. how long it might take to sell and at what price). You could always try selling it your self, but odds are not in your favor. Agents generally have the most qualified buyers and listing it will give you better exposure. You could even try lease optioning it to somebody. Just a few ideas. Not knowing all the details, I hope that you gives you a godd general idea of some options and information.
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Ed, Both Buyer And Seller, 94588
Sat Dec 15, 2007
You'll have to try for a short sale but your chances are slim. A deed in lieu is your best bet at this point unless you can keep up the payments.

Merced is a dead area. You will not get any bank cooperation on a short sale
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